• back
  • 6.3.1-MARKET PROFILES-INDIA-THE STRUCTURE AND CHARACTERISTICS OF THE DOMESTIC COTTON MARKET

  •  
  • The structure and characteristics of the domestic cotton market

    Chapter 6 - Market profiles - India 

     
     

    Importance of cotton in Indian textiles

    The Indian textile industry is predominantly cotton based. In contrast to worldwide textile consumption, which is tilted heavily in favour of non-cotton fibres with ratio of 40:60 ‘cotton’ to ‘non-cotton’ fibres, consumption in India is 60:40 in favour of cotton. The current size of the Indian textiles industry is estimated to be $47 billion per year, and growing at 20% per year. Since the phasing out of the quota regime, Indian exports have grown by 26% compared to the previous year’s total of $13 billion. The overall mood in the textile sector is upbeat.

    National cotton production

    India is the third largest producer of cotton in the world, but in terms of productivity it is one of the lowest. The average area under cotton production has varied from 8.7 million hectares in 2001/02 to 8.8 million hectares in 2005/06. Production during the same period has increased from 2.686 million tons to 4.148 million tons. The average yield of Indian cotton, which was 307 kg per hectare in 2001/02, had improved to 468 kg per hectare in 2005/06.

    The supply and demand for cotton, and the area, production and productivity of cotton in India for the last five years as estimated by the Cotton Advisory Board are shown in figures 6.9 and 6.10.

     

    6.3.1-en1 

     

    Source: Cotton Advisory Board, Government of India.

     

    6.3.1-en2 

     

    Source: Cotton Advisory Board, Government of India.

    The domestic cotton market

    The domestic cotton market has been fully integrated with the international market for the past five or six years, and domestic prices move in tandem with international prices. Prior to 1997, domestic cotton prices used to register some increase every year but were still lower than international prices. However, since 1997/98, the world cotton scenario has undergone a change in which international prices nose-dived to their lowest levels especially in 1999/00. World prices had a cascading effect on domestic prices, and large-scale imports were witnessed during this period mainly because of price considerations. Again in 2004/05 because there was record world production, international cotton prices declined. A similar situation was witnessed in the domestic market too, as the country had harvested a record cotton production of 4.15 million tons. The current level of imports ranges between 85,000 and 100,000 tons per year, confined to extra-long staple cotton, and imports may continue to increase in the coming years. The movement of average annual prices of seed and lint cotton is shown in figures 6.11 and 6.12.

     

    6.3.1-en3 

     

    Source: Cotton Advisory Board, Government of India.

     

    6.3.1-en4 

     

    Source: Cotton Advisory Board, Government of India.

    Quality of cotton supplied by the domestic industry, and imports


    India has the distinction of producing a number of cotton varieties, comprising short staple, medium long staple, long staple and extra-long staple (ELS) cottons, to meet the specific quality requirements of the domestic textile industry. The major varieties grown and commercially marketed in India are Bengal Deshi, V-797, Jayadhar, Y-1, J-34 Saw Ginned, NHH-44, LRA, H-4/MECH 1, Shanker 6, Bunny/Brahma, MCU 5, DCH-32 and Suvin. DCH-32, MCU-5/Surabhi, and Suvin are ELS varieties grown in India. While the country is self-sufficient in general cotton varieties, the production of ELS varieties has remained deficient because of fluctuating production in comparison with increased consumption of ELS cotton. To meet specific requirements for ELS varieties, textile mills import cotton, especially from the United States (pima) and Egypt (Giza).

    There has been a downward trend in imports of cotton because domestic production has increased. Imports of raw cotton from 2001/02 to 2004/05, and imports by country for year 2004/05 are shown in figures 6.13 and 6.14 respectively.

     

    6.3.1-en5 

     

    Source: Directorate General of Intelligence and Statistics (DGCI&S), Government of India.


    6.3.1-en6 

     

    Source: Directorate General of Intelligence and Statistics (DGCI&S), Government of India.